William Selway

The legacy of the 18-month recession that ended in June 2009 still looms large for Americas states and cities. While revenue has revived, governments are under pressure to increase funding for education and other services after years of cuts.

Efforts to curb public-employee power in states such as Wisconsin, Indiana and Michigan, may embolden other municipalities, leave workers more vulnerable and prompt unions to new tactics of opposition.

Senator Orrin Hatch is pushing an overhaul of public pensions that would let life insurers grab a bigger share of the $3 trillion in state and local funds, a potential windfall for companies such as MetLife Inc. and Prudential Financial Inc.